FTIL shares hit lower circuit for a second day

 

 

 

Mumbai: Shares of Financial Technologies India Ltd (FTIL) touched their lower circuit for the second consecutive day on Friday after chairman Jignesh Shah was sent to police custody until 15 May as part of the investigation into the payment default at the National Spot Exchange Ltd (NSEL).

On BSE, FTIL shares fell by the daily 5% limit to Rs.262.90. In the last one month, the shares have lost nearly 25%.

A Mumbai court on Thursday sent Shah, chairman and group chief executive of FTIL, and former chief executive of Multi Commodity Exchange of India Ltd (MCX) Shreekant Javalgekar to police custody till 15 May in connection with the Rs.5,574.34-crore payments fraud at NSEL.

Mumbai police additional commissioner Raj Vardhan Sinha said on Wednesday in a televised media briefing that Shah, 47, was arrested on Wednesday for custodial interrogation in order for authorities to learn more about the payment default.

Meanwhile, late on Thursday, the FTIL board announced that Venkat Chary, independent non-executive director will be independent, non-executive chairman of the board. “In the interim, the existing two whole-time directors of the company shall be in charge of the day-to-day affairs,” said a stock exchange announcement by FTIL.

Further, the board will meet on 10 May again to take stock of the divestment in MCX.

The crisis at NSEL came to light on 31 July 2013 when the exchange suspended trading in all but its e-series contracts. These, too, were suspended a week later. The suspension may have been prompted by instructions from the ministry of consumer affairs to the exchange asking it not to offer futures contracts. A spot exchange isn’t supposed to do so, but NSEL was doing just that.

NSEL tried to implement the change, but because its appeal was to investors and members who were not interested in spot trades, it eventually had to suspend all trading.

It later emerged that all trading on NSEL happened in paired contracts, with investors, through brokers, buying a spot contract and selling a futures one for the same commodity.

The entities selling on spot and buying futures were planters or processors and members of the exchange. It turned out there were only 24 of them, and they used the paired contracts as a way to raise easy money.

Subsequent investigations have highlighted the possibility of fraud and, according to the Forward Markets Commission, the involvement of promoters. On 14 August, NSEL proposed a payout plan, but it has been unable to stick to the schedule and has not made a single successful payout ever since.


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